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NABE OUTLOOK 2004Q1 SURVEY

NABE OUTLOOK 2004Q1 SURVEY. Presented to Silicon Valley Round Table MARCH 9, 2004 Duncan H. Meldrum NABE President & Chief Economist, Air Products. OUTLOOK SUMMARY. 2004: Strongest Real GDP growth since 1984 2005: Growth recedes to trend Investment accelerates

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NABE OUTLOOK 2004Q1 SURVEY

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  1. NABE OUTLOOK2004Q1 SURVEY Presented to Silicon Valley Round Table MARCH 9, 2004 Duncan H. Meldrum NABE President & Chief Economist, Air Products

  2. OUTLOOK SUMMARY • 2004: Strongest Real GDP growth since 1984 • 2005: Growth recedes to trend • Investment accelerates • Employment recovers, but slowly • Held back by productivity gains & high benefit costs • Unemployment rate falls to 5.6% • No inflation threat • No rise in short rates until 2004Q3 • Long rates rise with recovery • Profits continue to recover • Demand expansion raises top line growth • Strong productivity gains and moderate wage gains lead to lower unit labor costs in 2004

  3. REAL GDP GROWTHFEB ‘04 FORECAST: STRONGER 2004

  4. MAIN SOURCES OF GDP STRENGTHLESS RELIANCE ON POLICY IN 2004

  5. REAL GDP GROWTH RATES

  6. 2004 OUTLOOK FEB ’04 VS PREVIOUS FORECASTS

  7. 2005 OUTLOOK FEB ’04 FORECAST

  8. INVENTORY INVESTMENTLARGE SWING FROM 2003 TO 2004

  9. INDUSTRY SURVEY SUPPORTSCAPITAL SPENDING OUTLOOK

  10. EMPLOYMENT FORECASTSlow Improvement

  11. SIGNIFICANT FACTORS HOLDING BACK PAYROLL HIRING (RANKED)

  12. MOST IMPORTANT FACTOR DRIVING PRODUCTIVITY IN U. S.

  13. PRODUCTIVITY GROWTH SLOWSBut Outlook Stronger in 2004 Than in November

  14. COMPENSATION PER HOURMore Modest Gain Now Expected In 2004, Stronger Gain in 2005

  15. Unit Labor CostsLarger Decline Now Expected in 2004

  16. AFTER TAX CORPORATE PROFITSFaster Growth Than Previous Forecasts

  17. INFLATION IS NOT AN ISSUE

  18. INTEREST RATE OUTLOOKFirst Short Term Increase In 2004Q3

  19. Federal Deficit ForecastA Little Deeper in FY2004 (With Some Recovery In FY2005)

  20. REAL NET EXPORTS Better Performance Expected Net Exports of Goods & Services, NIA Basis

  21. FACTORS BEHIND DOLLAR’S DECLINE VS EURO (&, TO LESSER EXTENT, OTHER CURRENCIES)

  22. OUTLOOK SUMMARY • 2004: Strongest Real GDP growth since 1984 • 2005: Growth recedes to trend • Investment accelerates • Employment recovers, but slowly • Held back by productivity gains & high benefit costs • Unemployment rate falls to 5.6% • No inflation threat • No rise in short rates until 2004Q3 • Long rates rise with recovery • Profits continue to recover • Demand expansion raises top line growth • Strong productivity gains and moderate wage gains lead to lower unit labor costs in 2004

  23. JANUARY ’04 INDUSTRY SURVEY

  24. JULY ‘03 INDUSTRY SURVEY

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